Research Shows Little Relationship Between Stricter IP Laws And Innovation Or Economic Growth

from the that's-just-not-how-it-works dept

We've argued for years that intellectual property laws have little, if any, connection to innovation and economic growth. We've seen so much research on this that, at this point, it's hardly even an open question. And yet... politicians and the press (and beneficiaries of stricter IP law) always seem to insist that there's a clear, undeniable and strong positive connection between stricter IP laws or enforcement and economic growth and innovation. Unfortunately there are no legitimate studies that seem to support that argument. Mike Palmedo recently put together a presentation highlighting some of the research which demonstrates the lack of a connection between such policies and economic growth or innovation. Here's a quick summary:

“…strong IP rights alone provide neither the necessary nor sufficient incentives for firms to invest in particular countries… The evidence that foreign investment is positively associated with IP protection in most developing countries is lacking.”

Robert L. Ostergard., Jr. “Policy Beyond Assumptions: Intellectual Property Rights and Economic Growth.” Chapter 2 of The Development Dilemma: The Political Economy of Intellectual Property Rights in the International System. LFB Scholarly Publishing, New York. 2003

“…no consistent evidence emerged to show that IPR contributed significantly to economic growth cross-nationally. Furthermore, when the nations are split into developed and developing countries, results to suggest otherwise did not emerge.”

Carsten Fink and Keith Maskus. “Why We Study Intellectual Property and What We Have Learned.” Chapter one of Intellectual Property and Development: Lessons from Economic Research. 2005. (Link)

“Existing research suggests that countries that strengthen their IPR are unlikely to experience a sudden boost in inflows of FDI. At the same time, the empirical evidence does point to a positive role for IPRs in stimulating formal technology transfer.”

“Developing countries should carefully assess whether the economic benefits of such rules outweigh their costs. They also need to take into account the costs of administering and enforcing a reformed IPR system”

“We still know relatively little about the way technology diffuses internationally.”

“Middle income countries must strike a complicated balance between promoting domestic learning and diffusion, through limited IP protection, and gaining greater access to international technologies through a strong regime… it makes little sense for these nations to adopt the strongly protectionist IP standards that exist in the U.S., the EU and other developed economies. Rather, they should take advantage of the remaining policy space provided by the TRIPS Agreement.”

“It is questionable whether the poorest countries should devote significant development resources to legal reforms and enforcement of IPR.”

“Overall, it is fair to say that the existing empirical evidence regarding the overall technology-transfer impacts of increased IPR protection in developing countries is inconclusive at this stage. What is not yet clear is whether sufficient information flows will be induced to procure significant dynamic gains in those countries through more learning and local innovation.”

“Developing countries need not only to obtain foreign technologies but also to learn how to use them to their fullest potential. In this context, it is useful to make a distinction between the initial introduction of a technology into a country and its subsequent diffusion within the domestic economy.”

Alexander Koff, Laura Baughman, Joseph Francois and Christine McDaniel. “Study on the Economic Impact of ‘TRIPS-Plus’ Free Trade Agreements.” International Intellectual Property Institute and the U.S. Patent and Trademark Office. August 2011.

TRIPS-Plus IPRs viewed as “important, but not essential” for attracting investment. Many other factors matter (taxes, human capital, clustering, etc).

Many countries had recently changed laws to comply with TRIPS, so changes for FTAs had a smaller effect on investment.

The way in which the obligations were implemented was important. It is not wise to simply impose one legal framework on top of another. Implementation of FTAs requires taking specific nations’ legal systems into account.

That same post includes additional data from a research paper that Palmedo himself is working on, looking specifically at the impact on foreign direct investment (FDI) in countries that sign free trade agreements (FTAs) with the US, which require stricter IP laws. Palmedo looked at three countries, Guatemala, Peru and Nicaragua, that had signed such FTAs with the US, and studied how much foreign direct investment they got before and after the new laws went in place. He also looked at how much change there was in technology licensing. The results, again, highlighted how such rules appeared to have little direct impact on these items -- even if they're often cited as the key reasons for signing these agreements. As Palmedo concludes:

In general, the results show that stronger IPRs were not correlated with changes in FDI. They were correlated with changes in licensing, but not always in the direction one would expect. The data does not show that stronger IPRs required by FTAs drove significant amounts of tech transfer in these three countries.

There are plenty more studies along these lines. At what point do we stop taking it on faith that expanding intellectual property laws is automatically good for the economy and innovation and start looking at what actually works?

Re: Facts...

Hmm... How about a study, paired with this one, showing the rising costs of current enforcement compared to previous levels of enforcement? Adjusted for inflation, of course. No evidence of positive effect plus high costs to maintain might get their attention.

Then again, if that were the case, we might have had more reasonable responses to the "wars" on drugs and immigration by now...

You know, instead of arresting people who get extra medication for emergencies, and building a half-assed wall along the southern border (using illegal immigrant laborers, natch).

The only innovation and economic growth that has occurred as a result of stricter IP laws is the innovation of copyright trolls to sue thousands of John Does at once, and the economic growth in their pockets.

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The only innovation and economic growth that has occurred as a result of stricter IP laws is the innovation of copyright trolls to sue thousands of John Does at once, and the economic growth in their pockets
Nah - you're forgetting all the money made by DRM purveyors thanks to their legal "Emperor's new clothes" law.

According to this law they can get away with selling a product that doesn't work - because the law says that it DOES work - even if it doesn't!

Re:

I see that you are making a case for developing nations; however, you seem to be generalizing it across the board to developed, semi-developed, and underdeveloped nations, which does not necessarily hold true.

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Why not? The major problems with Ip are economically-based, so it stands to reason that "enforcement" by governments is less economical than businesses adapting to the evolving marketplaces, which seem to change more drastically in developed and semi-developed economies.

Re: Re: Re: Re:

Re:

I see that you are making a case for developing nations; however, you seem to be generalizing it across the board to developed, semi-developed, and underdeveloped nations, which does not necessarily hold true.

Re:

The case is being made by the researchers and not Mike who is just highlighting the conclusion of the research.

The research points to the costs outweighing whatever benefits countries may gain from draconian IP laws. Nor could they identify any gains from "strong" IP laws. A situation which also applies to the United States and the EU. Mostly costs and few, if any, identifiable benefits. In fact, reading over the linked articles, there is little or no evidence at this stage that there was a measurable increase in home grown technical innovation (patents) or arts activities (copyright).

Sure there was an increase in technology transfer from richer to poorer parts of the world when somewhat stronger IP laws came into place. But that's not home grown.

Of course this could simply be that innovation was taking place regardless and that arts communities were already creating at a high level because that's what they do -- they create -- whether or not a "strong" copyright realm is in existence or not. In fact there's far more evidence of the reverse where "strong" IP laws exist.

Here in North America we get to blame "piracy" if those "making a living" or acting as gatekeeper don't make what they anticipate they should or to rampant infringement AND piracy should someone "violate" one or two of the overly broad software patents the USPTO allows through.

Re: Re:

As always, Mike "draws a conclusion" by not drawing a conclusion, rather he posts the words that he agrees with, but doesn't take responsibility for them. Yet, his positions are clear.

In other words, Mike highlights what he agrees with, and ignores anything he does not like.

This is another case where the details of the various studies would show you that they are generally looking at the effects on DEVELOPING nations, and not those who create much of the IP in question. The lack of strict IP enforcement, combined with richer countries generating that IP is a perfect situation for a developing nation of leverage and move ahead. Someone else does the brain work, they do the cheap labor grunt work, replicating the designs, IP, and products of the richer neighbors.

What doesn't get discussed is that attempting to protect IP is normal, because it's a question of the "rich" (richer nations) not wanting to bear the costs of dragging the developing countries along with them. Both China and Japan are perfect examples of countries who zoomed up by cribbing the notes of other IP wealthy countries.

The real problem? It's not an advancement, as much as an attempt to catch up. It's not new leaders, it's the old laggards playing catch up by copying someone else's term paper. It's not clear that they are really learning the lessons, only that they have good enough pensmanship to make the copy.

Citing a few reports over a decade, most of which are couched in a "what does this do for developing nations" isn't really addressing the issues for the US or other IP producer countries. It only supports the concept of allowing the poorer students to keep up by copying the smart kids test papers. Is that what you really want?

Great Business Idea

As the article notes, there really are not any studies linking strict IP laws to increased innovation and economic growth. There is obviously a need for that.

So, I will form a company with a name like "21st Century Innovation Policies Research Council" and quickly churn out a series of reports with page after page of detailed data (compiled in confidence so it can't be verified) showing clearly that IP laws have nothing but benefit - the stricter the law, the greater the benefit.

when you can convince those in the 'driving seats' and stop those that are receiving 'incentives' that basically screw up almost everything rather than improving almost everything, just to preserve a single industry

It didn't really help society, it certainly didn't do what it's zealots claimed it would do, but in the end - it made some people *very* rich.

Isn't that the purpose of most laws? To make some people rich?

While it's claimed that most laws are made for some sort of 'protection' or some such unbelievable hogwash, we all know that MOST are made to make someone rich... or perhaps keep the other guy from getting rich to sustain business models that the free market would otherwise crush.

But you know - socialism as such is all well and good, until everyone else runs out of money to take - then it dies all the same.

Compare Industries with High and Low IP Protection

more dissembling

My guess is the same parties who paid for your "research" paid to get the patent bill passed.

Itís about property rights. They should not only be for the rich and powerful. Show me a country with weak or ineffective property rights and Iíll show you a weak economy.

Prior to eBay v Mercexchange, small entities had a viable chance at commercializing their inventions. If the defendant was found guilty, an injunction was most always issued. Then the inventor small entity could enjoy the exclusive use of his invention in commercializing it. Unfortunately, injunctions are often no longer available to small entity inventors because of the Supreme Court decision so we have no fair chance to compete with much larger entities who are now free to use our inventions. Essentially, large infringers now have your gun and all the bullets. Worse yet, inability to commercialize means those same small entities will not be hiring new employees to roll out their products and services. And now some of those same parties who killed injunctions for small entities and thus blocked their chance at commercializing now complain that small entity inventors are not commercializing. They created the problem and now they want to blame small entities for it. What dissembling! If you donít like this state of affairs (your unemployment is running out), tell your Congress member. Then maybe we can get some sense back in the patent system with injunctions fully enforceable on all infringers by all inventors, large and small.

Those wishing to help fight big business giveaways should contact us as below and join the fight as we are building a network of inventors and other stakeholders to lobby Congress to restore property rights for all patent owners -large and small.